RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:ts9222
OK one last reply from my side. Just for educational purposes. Hopefully you get the relationship between assets and debt/equity now.
Yep the numerator is assets not debt, you got this one right.
Lets make a simple example: Company X has $ 10 million in assets, $ 5m debt and $ 5m equity
The ratio would be 10/5 = 2 (also called equity multiplier)
So what does this mean? For every dollar in equity the have one dollar in debt. Because the leverage ratio is 2.
There is nothing about debt in formular? What's my magic trick that I can make a statement about debt? Simple, you have to understand that assets = debt + equity in every balance sheet. Unless your company can print its own money or another mysterious source is doing their financing. You dont need to know the debt numbers because assets - equity also has to be debt!
Of course these numbers offset each other! (facepalm)
The crucial question however is how were these assets financed? Debt or equity?
So please use my numbers take the 1.95 for EDV subtract 1 and multiply it with the equity.. Opps there you have EDV's debt. So whats so complicated there?
So if you still dont get the most basic explanation is on investopedia.
https://www.investopedia.com/terms/l/leverageratio.asp
Again I'm not the only one using total liabilities over equity, even Investopedia!!! does
I'm not inflating anything, numbers do not lie
https://www.investopedia.com/terms/d/debtequityratio.asp
the ratio you are calculating has its own name: long term debt to equity ratio
Hope you can follow my financial statments 101 class